Embraer releases earnings for fourth quarter of 2018

During 4Q18, Embraer delivered 33 commercial and 36 executive aircraft (24 light jets and 12 large jets), for a total of 90 commercial and 91 executive aircraft (64 light and 27 large).

Deliveries of commercial jets were within the company’s stated guidance range of 85 to 95 deliveries for 2018, while executive jet deliveries were below guidance of 105 to 125 total jet deliveries for the year. Global market conditions for executive jets, although gradually improving, continued to recover more slowly than expected. In addition, Embraer’s increased focus on improving profitability and price preservation, as well as the recent launch of the new midsize/super midsize executive jets (Praetors), which will begin delivering in 2019, led the Company to adopt a more cautious approach toward deliveries in 2018.

Consolidated revenues of US$ 1,670.9 million in 4Q18 represented a 3.5% year-over-year decline, with revenue growth in the Commercial Aviation and Services & Support segments offset by declines in the Company’s remaining segments. For the full year 2018, Embraer’s consolidated revenues totalled US$ 5,071.1 million versus US$ 5,859.4 million reported in 2017, driven by lower deliveries in the Commercial Aviation and Executive Jets segments as well as lower revenues in the Defence & Security segment, which was negatively impacted by the cost base revision for the KC-390 contract in 2Q18, resulting from the incident involving prototype 001 in May 2018.

These declines were only partially offset by 6.4% revenue growth in the Services & Support segment, which finished 2018 with US$ 980.8 million in revenues.

The Company’s reported gross margin of 14.1% in 4Q18 represented a decline compared to the 20.0% reported in 4Q17, driven principally by lower gross margin in Commercial Aviation on unfavourable mix and in the Defence & Security segment on additional cost base revisions on the KC-390 development contract. For fiscal year 2018, Embraer’s gross margin was 15.1%, representing a decline from the 18.7% reported in 2017 mainly due to lower gross margin in the Company’s Commercial Aviation and Defence & Security segments.

The Executive Jets segment reported an increase of more than 500 basis points in its gross margin for 2018 as compared to 2017, while the Services & Support segment had relatively stable gross margins in 2018.

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